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Rand on front foot on USD weakness

Johannesburg - The rand was on the front foot in early trade on Monday on renewed dollar weakness after the G20 meeting at the weekend.

At 08:35 local time the rand was bid at R6.8878 to the dollar from R6.9258 at the previous close. It was bid at R9.6739 to the euro from R9.6660 before and at R10.8459 against sterling from R10.8630 at its previous close.

The euro was bid at $1.4049 from $1.3956 on Friday.

Standard Bank analysts said in their morning report that rand bulls are on the front foot this morning.

"The dollar has retreated in the wake of this weekend's G20 Finance Ministers meeting, as concrete measures to address the contentious issue of currency devaluation ("currency wars") were effectively deferred until next month's G-20 meeting," they wrote.

"Asian equity markets and commodity prices are firmer this morning, therefore, buying into rand strength - ahead of SA's Medium Term Policy Budget Statement on Wednesday - is our preferred strategy," they said.

RMB analysts said in their morning report that it's questionable as to whether the joint statement released by finance officials following the G20 summit in South Korea over the weekend, had any bearing on global currency markets.

"EUR/USD has resumed its uptrend, AUD/USD is flirting with parity and USD/ZAR is suspended below R6.90. Although the statement watered down speculation of a "global currency war" by explicitly stating that member countries will refrain from competitive devaluations, it has failed to impact USD sentiment meaningfully," they said.

"With the weekend's events behind, QE2 comes back into focus with the USD likely to remain under pressure over the course of the day," they added.

A lack of event risk today means that USD/ZAR should continue to meander in a narrow range.

According to Dow Jones Newswires, the dollar weakened early on Monday after the Group of 20 industrial and emerging nations struck an agreement at their weekend meeting in South Korea on the need to avoid "competitive devaluation" of their currencies and push toward market-based exchange-rate systems - a deal that traders interpreted as positive for risk sentiment.

Analysts expressed surprise that the G-20 meeting reached any kind of agreement on currencies, a factor that should continue to pressure the dollar for the rest of the global day.

"We did get slightly stronger language on FX than perhaps people might have been anticipating and that should continue to see the dollar move down," said Deutsche Bank strategist John Horner.
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Rand - Dollar
18.90
+0.2%
Rand - Pound
23.86
+0.2%
Rand - Euro
20.36
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